Constitutionally Untethered? The SERD Panel’s National Innovation Council and the Constraints It Does Not Address

John H. Howard, April 12 2026

The Ambitious Australia report of the Strategic Examination of Research and Development (SERD) proposes an elaborate governance architecture for Australia’s research, development and innovation (RDI) system. At its centre is a National Innovation Council (NIC) that would “oversee Commonwealth RDI funding” and report directly to the Prime Minister and the Minister for Industry and Innovation.

The Panel "recommends leveraging a reformed IISA as the foundation for the NIC" (page 27), effectively converting a predominantly regulatory and administrative body, with roles under the Industry Research and Development Act 1986, into a strategic coordination body.

Beneath the NIC sit six National Innovation Pillars, each governed by a National Strategy Advisory Council (NSAC), delivering through up to eighteen National Strategic Initiatives (NSIs), with a proposed consolidation of existing programs including CRCs, Trailblazers, the Industry Growth Program and NCRIS.

This is an ambitious institutional blueprint. The question is whether it can work within Australia’s constitutional and institutional framework. From the Report, it would appear that the Panel did not give adequate consideration to the structural constraints that will shape and limit what its proposed architecture can achieve.

The Ministerial Authority Problem

The report identifies more than 150 Commonwealth R&D programs spread across thirteen ministerial portfolios with combined annual expenditure exceeding $14 billion. The NIC is proposed to oversee this expenditure and consolidate programs currently administered by different Ministers under different legislation. The report does not answer the threshold question: by what authority would the NIC direct or coordinate programs administered by other Ministers under their own portfolio responsibilities?

Under Westminster conventions, it cannot. Section 64 of the Constitution vests departmental administration in individual Ministers. Executive power flows from the Crown to each Minister within their portfolio. The Constitution does not mention the Prime Minister or Cabinet. An advisory body reporting to the Prime Minister may recommend and build consensus, but it cannot direct a Minister to redirect funding or change priorities within another portfolio.

The Prime Minister can raise matters in Cabinet and seek collective agreement but cannot unilaterally override a Minister’s statutory responsibilities. This is a fundamental constraint that no governance redesign at the advisory level can overcome. Unlike presidential systems where the head of government can issue executive orders, Australia’s Westminster framework distributes executive authority among individual Ministers within their portfolios.

This is not a theoretical objection. It explains much of the history of failed coordination in Australian innovation policy. The National Science and Technology Council, Industry Innovation and Science Australia, the Prime Minister’s Science, Engineering and Innovation Council, and their predecessors all encountered the same limitation. They could advise, but Ministers responsible for the relevant portfolios, including Industry, Education, Health, Defence, Agriculture and Treasury, retained authority to accept or reject that advice as it applied to their own programs.

The result, repeatedly, has been that cross-portfolio coordination is agreed to in principle and frustrated in practice by the normal operation of ministerial government.

The most vivid recent illustration is the secret ministries affair of 2020–2021. Prime Minister Scott Morrison, seeking capacity to override ministerial decisions during the COVID-19 pandemic, had the Governor-General appoint him to administer five additional portfolios: Health, Finance, Industry/Science/Energy/Resources, Home Affairs and Treasury. The appointments were made under Section 64, in most cases without the knowledge of the incumbent Ministers or the Parliament.

When the appointments became public in August 2022, Solicitor-General Stephen Donaghue KC found them technically valid under Section 64 but concluded that the secrecy “fundamentally undermined” the principles of responsible government. The subsequent Bell inquiry found the appointments unnecessary and recommended reforms to prevent recurrence (Bell, 2022). Morrison was censured by the House of Representatives in November 2022 by 86 votes to 50.

The episode is instructive on two counts.

1. Even a Prime Minister prepared to use the constitutional machinery in unprecedented ways to accumulate portfolio authority could not do so openly or durably. The system treated the action as a constitutional violation in spirit, even where it was lawful in form.

2. The one instance where Morrison exercised his secret authority, overriding Resources Minister Keith Pitt to block the PEP-11 gas exploration proposal, immediately exposed the arrangement and generated the political consequences.

The affair demonstrates that centralised direction of ministerial portfolios runs counter to the constitutional design. Any NIC purporting to coordinate across portfolios must work through persuasion and Cabinet convention, not executive command.

A Statutory Officer Without a Clear Mandate

The report compounds these ambiguities through its treatment of the proposed Statutory Officer. Recommendation 1a provides that the NIC would be 'chaired by an eminent Australian, supported by a Statutory Officer.' The accompanying elaboration says the NIC should be supported by 'a statutory officer sufficiently resourced to provide the legal authority, independence and accountability to fulfil its mandate irrespective of political cycles.' These are the only references to the Statutory Officer in the entire report.

What makes this particularly puzzling is that a statutory officer already exists under the current arrangements. The Chairperson of IISA is appointed under Section 9 of the Industry Research and Development Act 1986, with duties specified in Section 11.

If the NIC is to be established by reforming IISA, as the report suggests, then the question is what happens to this existing statutory office. The report's language implies a two-tier structure in which an 'eminent Australian' chairs the NIC while a separate Statutory Officer provides the legal authority underpinning it. But the report does not explain how authority would be divided between the two. In particular:

• If the Statutory Officer is the continuation of the existing IISA Chairperson role, now subordinated to a political or Cabinet-appointed chair, then the legal authority under the Act would vest in a person who does not chair the body.

• If both positions are to be statutory, the Act would need to be amended to create a governance structure that it does not currently contemplate.

• If the 'eminent Australian' Chair is a non-statutory appointment sitting above a statutory officeholder, the arrangement would create an unusual hierarchy in which the person with political authority lacks legal authority, and the person with legal authority lacks the mandate to exercise it independently.

The report does not acknowledge, let alone resolve, any of these questions. This is indicative of the gap between the report's institutional ambitions and its constitutional grounding.

The Role of the Expenditure Review Committee

The report does not discuss the Expenditure Review Committee (ERC) of Cabinet, the primary decision-making body for Commonwealth expenditure. The ERC is chaired by the Treasurer, not the Prime Minister, and its deliberations involve intensive negotiation among portfolio Ministers competing for finite fiscal resources. Any NIC recommendation to consolidate and redirect billions of dollars in RDI spending would need to survive this process, where Ministers with established programs and constituencies have strong incentives to resist.

The report’s proposal to consolidate programs such as CRCs, Trailblazers, the Industry Growth Program and NCRIS under the NIC assumes this can be directed from the centre. In practice, several of these programs are administered under legislation or appropriations controlled by different Ministers. Consolidation would require either legislative change, which demands parliamentary support and takes time, or agreement among Ministers to transfer administrative responsibility, which is politically challenging and depends on the relative standing and interests of the Ministers concerned.

The history of program consolidation in Australian public administration confirms the point. Governments regularly announce consolidation and rationalisation. They rarely complete it. Each existing program has established constituencies, review cycles and reporting obligations. Departmental resistance to centralised allocation is predictable and, within the logic of ministerial responsibility, entirely legitimate.

A Minister who surrenders control of a program surrenders both the capacity to direct resources to policy priorities within their portfolio and the political credit that flows from program announcements.

The Federalism Gap

The SERD recommendations are overwhelmingly Commonwealth-focused, but many levers that determine innovation outcomes sit with the States and Local Governments: land use planning, much vocational education and training, business regulation, and the legislative framework for universities. The Australian Constitution does not include an express head of power for science, research, innovation or industry development. Commonwealth involvement in the RDI system rests on a patchwork of enumerated powers, principally taxation (Section 51(ii)), corporations (Section 51(xx)), benefits to students (Section 51(xxiiiA)) and tied grants to the States (Section 96).

The report’s proposal for “tri-sector collaboration” involving at least one State or Territory government may reflect some awareness of this constitutional reality. But the governance architecture does not address how coordination across levels of government would be sustained over political cycles. Cooperative federalism in Australia depends on political cooperation that the competitive dynamics of the federation frequently undermine.

No Australian government has successfully used intergovernmental mechanisms as a durable foundation for national RDI policy, and the report does not explain why its proposed arrangements would fare differently.

The Epistemic Divide

The disciplinary expertise required to design an innovation governance architecture and to assess its constitutional viability are distinct specialisations. The latter does not appear to have been adequately brought to bear on the former. The result is a governance proposal that is administratively detailed but constitutionally disconnected.

This pattern recurs repeatedly in Australian public policy: ambitious institutional blueprints designed by people who are experts in the policy substance but not in the machinery of government through which that substance must be translated into practice. The machinery imposes its own logic, and that logic is constitutional before it is administrative. When that sequence is reversed, implementation does not merely become difficult. It becomes legally uncertain.

The constitutional dimension is not a technicality to be resolved after the policy architecture is settled. It is a prior constraint that shapes what kinds of institutional arrangements are available in the first place. A governance model that cannot answer the jurisdictional question with precision has not finished the design work. It has deferred the hardest part.

This disciplinary disconnect may help explain why so many previous Australian SRI coordination proposals have failed. A governance proposal explaining how it would avoid these implementation failures would have been a useful adjunct to the Report's recommendations.

What Might Constitutionally Informed Governance Look Like?

A NIC designed with constitutional constraints in mind would look quite different from what the SERD report proposes. The analysis above suggests that the central problem is not a lack of coordination ambition but a failure to ground that ambition in the machinery of government as it actually operates. Any credible governance model must therefore begin with the jurisdictional question, not defer it. A constitutionally informed framework would have two foundational and reinforcing elements.

Element 1: Cabinet-Level Coordination

The first element would establish a coordination mechanism within the authority of the Expenditure Review Committee, in which portfolio Ministers collectively commit to reallocation decisions. It would require the Prime Minister to invest sustained political capital in making innovation coordination a standing Cabinet priority, with the Treasurer's support.

This element would provide the political authority that no external body can supply. The principle that Ministers hold the constitutional responsibility for expenditure within their portfolios would be retained. The reality is that only a Cabinet-level process can reconcile competing priorities for portfolio resource allocation into coherent investment decisions.

Element 2: Statutory Independence Embedded in Legislation

This element would establish an Australian Innovation Commission, under legislation that provides independence from individual ministerial direction, loosely modelled on the Productivity Commission.

Notwithstanding its critics, the Productivity Commission has maintained analytical commitment and institutional continuity across governments of different persuasions precisely because its authority derives from statute rather than from ministerial delegation. That independence has allowed it to produce informed analysis, research, and advice that sits outside the political cycle without being disconnected from the policy process.

An Innovation Commission built on this architecture would supply durable analytical capability that produces evidence and advice on its own terms. It would possess a legislative mandate that endures changes in government, a defined relationship with the Parliament, and an epistemic foundation in research and analysis rather than in administrative coordination.

Most significantly, it would reconstitute the analytical and advisory functions that were lost when the BIE and EPAC were absorbed into the Productivity Commission in 1998, within the context of the New Public Management agenda, but with a mandate appropriate to contemporary conditions. This mandate might cover at least five core functions, each addressing a gap in the current institutional architecture:

1. Sustained analytical capacity on innovation and industry economics. This means ongoing research on firm-level innovation behaviour, technology adoption and diffusion, the structure and dynamics of innovation ecosystems, the performance of public research institutions, the effectiveness of tax expenditure and direct funding programs, and the interaction between innovation policy and broader economic, social and environmental outcomes.

2. Assist in developing an Innovation and Industrial Strategy that puts firms, users and places at the centre. This means analysing innovation as something that occurs in specific firms, sectors, institutions, and locations, shaped by the interaction of economic, socio-cultural, resource and environmental conditions. The Commission’s analytical framework would draw on the growing international evidence on innovation ecosystems, complementarities and place-based dynamics, rather than treating innovation policy as a subset of competition or trade policy.

3. Conduct inquiries into specific innovation and industry policy questions, operating with the same independence, transparency and public process that gives the Productivity Commission its credibility. References would come from the Minister for Industry, Science and Resources (or equivalent), ensuring alignment with the portfolio where innovation policy instruments are concentrated.

4. Provide regular reporting on Australia’s innovation performance, benchmarked against international comparators, analogous to the PC’s Report on Government Services. This longitudinal reporting function would create the evidence base for sustained policy attention that episodic reviews cannot provide.

5. Maintain a standing advisory function, drawing on structured engagement with firms, researchers, investors, State and Territory governments and other stakeholders. This would create a deliberative function relevant to the innovation policy domain, providing a channel for strategic intelligence that the formal inquiry model does not capture

Commissioners would be appointed by the Governor-General on the advice of the Minister for Industry and Innovation, with a specified number to be nominated by State and Territory governments.

Overseas models combine coordination with either funding or advisory functions. The proposal here is deliberately narrower: an institution that analyses, advises, and monitors rather than one that funds or directs. Australia already has funding agencies. What it lacks is an institution with the statutory independence and public accountability to tell governments what is working, what is not, and why.

How the Two Elements Work Together

The relationship between the two elements is functional. The statutory body produces the analysis. The Cabinet mechanism acts on it. Neither is sufficient alone.

Without the Cabinet process, the statutory body produces advice that no one is obliged to reconcile across portfolios. Without the statutory body, the Cabinet and ERC processes operate on whatever evidence individual departments choose to supply.

The SERD report proposes neither element. It proposes a structure that assumes the coordinating authority of the first without the legislative foundation of the second, and the analytical independence of the second without the statutory basis to sustain it.

A Continuing Role for Industry Innovation and Science Australia

IISA's statutory architecture was designed for program administration and regulatory decision-making, not for the kind of sustained, independent analytical work that the Innovation Commission would perform. More generally, across the practice of Australian public administration, attempts to layer strategic advisory functions onto an administrative chassis have yielded limited results, largely because the institutional design does not support them.

An Innovation Commission, established as a dedicated analytical body, would address this structural mismatch rather than asking IISA to perform a function it was not really designed for.

The Continuing Role of the Productivity Commission

The Productivity Commission would continue to perform the functions for which it was designed and at which it excels: competition policy analysis, regulatory review, trade policy assessment, microeconomic reform, and its intergovernmental reporting responsibilities, including the Report on Government Services.

These are economy-wide analytical tasks that require the institutional independence and detachment from portfolio interests that the PC's location within the Treasury portfolio provides. An Innovation Commission would complement this work, not duplicate it, by addressing the questions of innovation and industry economics that the PC's mandate and institutional orientation do not realistically encompass.

Australia's Research, Development and Innovation System would be well served by three complementary institutions, each performing a distinct function.

• The Innovation Commission would provide sustained, independent research on innovation and industry economics.

• The Productivity Commission would continue its economy-wide efficiency analysis and regulatory review.

• IISA would maintain its statutory role in R&D Tax Incentive administration, program oversight and venture capital registration.

Together, the three bodies would constitute a coherent institutional architecture for evidence-based RDI policy.

Conclusion

The Panel may have proposed an aspirational architecture on the assumption that political will could overcome institutional friction. More likely, the constitutional and institutional constraints were simply absent from the analytical framework the Panel brought to its task.

For policymakers and advisers working with the SERD recommendations, this is important. The NIC architecture may serve a useful convening and advisory function, provided expectations are calibrated to what an advisory body can achieve within ministerial government. It is unlikely to deliver the cross-portfolio consolidation and strategic redirection the report envisages without the legislative and institutional reform the report does not contemplate.

Innovation policy must also be designed to work within the federation, taking account of the distribution of powers, the requirements of cooperative federalism and the constitutional limitations on Commonwealth spending.

References

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